Presuming that most companies started their initial expansion through organic growth, what are some of the common drivers or thoughts that kick in such that companies switch their attention to source for potential M&A opportunities?
Majority of corporations will seek M&As in order to gain a strategic advantage. The next big reason would to create a vertical or horizontal integration of the company. Finally, a company that has exhibited considerable organic growth, would want to invest its excess earnings in inorganic growth.
To add to the above comments, I have seen acquisition deals of oversees companies to relocate to to our country in an attempt to localize different product & services and contribute to the local economy. so far no failures.
There are good and bad reasons why companies M&A deals instead of organic growth. Too much cash, competitor elimination, and management hubris are among the bad ones. At the end of the day, M&A is only an instrument that should be used correctly. As with any project that the company takes it should have a positive NPV.
Companies pursue mergers and acquisitions for several reasons. The most common motive for mergers, for instance, increase in financial capacity–>lacking adequate financial capacity, a company may merge with another.
Companies should continuously consider M&A opportunities as part of the long-term strategy, focused on core competencies and close adjacencies. M&A may prove to be a viable option given other alternatives (e.g. “buy vs. build” approach), and the Strategy/Corporate Development teams will present options for consideration. Once a long-term strategy is approved, the M&A approach can begin.